Canadian governments are making good on a 2016 pledge to cut oil-and-gas-sector methane emissions by 40 to 45 per cent below 2012 levels by 2025.
Since the pledge, both Alberta and the federal government have issued rules on reducing leaks of methane, which is many times as potent a heat trapper as carbon dioxide, and both are slated to go into effect next year.
In recent weeks, however, the U.S. Environmental Protection Agency has proposed relaxing regulation of oil-and-gas-sector methane emissions, sparking debate about whether new tougher emissions rules will make Canada uncompetitive in attracting oil and gas investment.
Nevertheless, for our energy to retain market share globally, Canadian production must achieve a greenhouse gas footprint that is competitive with other sources and regions, not just the United States. This means lowering the emission intensity for Canadian oil and gas to best-in-class levels.
Methane leaks remain the big unknown factor in greenhouse gas emissions from the oil and gas sector. Current data show that methane already accounts for 8 per cent of Canada’s emissions. But the latest science suggests these emissions are systematically undercounted, by as much as 60 per cent according to some estimates. And methane packs a big climate punch in the short term, with 28 times the warming impact of carbon dioxide over 100 years (and 84 times the impact on a 20-year time scale).
As the old adage goes, what is measured gets managed. But tracking and reducing methane is trickier when compared to the more common greenhouse gas, carbon dioxide. It is relatively straightforward to monitor carbon dioxide emitted from a smokestack after a fossil fuel is combusted. Methane, however, can leak out across an extensive oil and gas infrastructure system, from tens of thousands of components that range from valves to well blow-outs.
The good news is that there is already a bottom-line incentive for natural gas producers to reduce methane leaks: lost profits on the escaping natural gas often exceed the costs to prevent escape. The tricky part is that the economics are hard to peg – producers and regulators are still struggling to determine where leaks are and how much methane is escaping.
In the oil and gas sector, producers need to move to measuring and reducing methane emitted across the value chain using today’s best-in-class technology. Appropriate regulation ensures that the externality of greenhouse gas emissions is reflected in producers’ operational decisions. Fortunately, technology is rapidly evolving in today’s world, bringing down the costs of detection and response. Competitiveness of the oil and gas sector on the long term means the industry must stay viable in an increasingly carbon-constrained world – that means addressing consumer and shareholder concerns about both climate change and natural gas wasted across a leaky system.
Regulating methane emissions will not only support the future competitiveness of the Canadian oil and gas sector but it will also provide real societal benefits and economic value. In fact, the federal government estimates emissions cuts from implementing regulations will result in $11.6-billion in reduced climate, health and environmental costs to society by 2035. Slightly more than $1-billion of revenue from the conserved gas partly offsets the $3.9-billion cost to industry and government, meaning that the expected net benefit of the regulations amount to $8.9-billion.
Of course, not all regulations are alike. To keep pace with innovation, regulators should be cautious about prescribing specific technologies through regulation: new and better innovations may be discouraged. Drones and satellites, for example, may prove to be valuable in providing accurate measurements in the future. If regulations pick winners too soon, we could lose out on the best solutions.
Looking ahead, methane emissions across the oil and gas value chain must be understood, managed and become a cornerstone of Canadian climate policy and emissions regulation. Our recent C.D. Howe Institute e-brief outlines a path forward with a policy framework that seeks to improve measurement accuracy, reduce emissions and advance innovation.
All three goals can be accomplished as part of a co-ordinated strategy that leverages new science to refine regulation and makes room for new measurement technology and mitigation.
Providing the right incentives for innovation in the oil and gas sector through consistent regulation will enable it to achieve the carbon and economic competitiveness required to maintain global market share into the future.
Sarah Marie Jordaan is assistant professor at the School of Advanced International Studies, Johns Hopkins University. Kate Konschnik is the director of the Climate and Energy Program at the Nicholas Institute for Environmental Policy Solutions at Duke University.